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31 Oct 2022
by Suzi Lowther

Are trustees doing enough to ensure scheme members are Pension Aware?

To mark Pension Awareness Week, PSGS’s Suzi Lowther asks whether trustees are thinking broadly enough when it comes to acting in members’ best interests

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This week is Pension Awareness Week, an event in the calendar that encourages everyone to get to know their pensions better.

Pension trustees have a tough job managing their scheme’s risks, investment, funding, and compliance to make sure members receive the benefits they’ve earned. Acting in the members’ best interests is integral to being a pension trustee, but are trustees thinking about what this means as broadly as they should?

Understanding pension options and decisions

This week is an opportune time for pension trustees to ask if they’re doing enough to help members understand all their pension options and decisions. I’d argue we could always be doing more to help members understand all the information they’re given.

For example, a member recently asked for a transfer value from their defined benefit (DB) scheme. They didn’t act on it within the three-month guarantee period so asked for another. However, the new quote was £100,000 lower than the original one. The member didn’t understand why this happened as it wasn’t explained and complained to the trustees.

This is a good example of where communications could be improved. The pension industry, including trustees, could do better at supporting scheme members. The individual in this example needed help to understand what the figures meant, why the numbers changed, the timescales involved and any actions they may need to take.

Most DB pension transfer values are closely linked to gilt yields – which we’ve heard a great deal about in recent weeks following Liz Truss’s mini-budget. As gilt yields go down, transfer values typically go up and vice versa.

Making this clearer to members could stop pension trustees and scheme administrators receiving questions and complaints. Similarly, helping people realise that whilst their transfer value may have fallen, the cost of buying a pension with it may also have fallen. The member may be no worse off despite the apparent substantial change in their transfer value.

There’s a lot for trustees to consider here. For instance, do they communicate topical issues via the pension scheme website and/or shift the responsibility to the administrator? If it’s the latter, how can they make sure they’re doing it effectively?

This can be made harder when pension trustee decision making is geared to trustee meetings. At a time of rapid market change like we’re seeing now, waiting three or six months each time to initiate, progress and sign off new member communications simply isn’t fast enough.

Is your pension trustee board fit for purpose?

Pension schemes with a sole trustee have a distinct advantage here. The professional corporate trustee will be taking decisions on a day-to-day basis. They can make decisions immediately and drive actions to be completed very quickly. A communication that could take months to complete with a traditional pension trustee board, may take only a day or two to be up on the scheme website where there is a professional sole trustee.

This can be important for piggy backing onto topical events that might interest members too, such as Pension Awareness Week. One of the key events of the week was National Pension Tracing Day (NPTD), which took place on 30 October. This campaign, initiated by Punter Southall Aspire and backed by leading pension providers, urges people to use the extra hour when the clock goes back to join in a ‘Great Pension Treasure Hunt’, and search for lost and forgotten pensions which are estimated to be worth a staggering £26.6bn.

This message is just as important for pension trustees as it is for members. Individuals who’ve lost their pensions could be a member in your scheme who you need to be in contact with to progress a liability management exercise or scheme buy out, for example.

So, as a trustee it could be in your interest to promote such events and we recommend you do so. It’s a relevant message any day of the year – new research from the Pensions Policy Institute shows there are 2.8m missing pension pots in the UK, which could affect 1 in 20 people.

For more information on NPTD, visit their website for a communication toolkit and lots of tips that could be shared with members on how to trace a lost or forgotten pension. Trustees could also point members to the live sessions that Pension Awareness are running this week to learn about the pension and investment basics.

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